Major legal showdown between the National Wooden Pallet & Container Association and developers behind the new Best Load software raise questions about the future of packaging design as well as PDS ownership.

By Chaille BrindleyDate Posted: 9/1/2010

The National Wooden Pallet & Container Association (NWPCA) has sued White & Co., the consulting firm founded by Dr. Mark White, the former director of the Center for Unit Load Design at Virginia Tech, and PalletOne and its CEO and President Howe Wallace over the development of a new software called Best Load. This unit load design software was first unveiled to the industry in the November 2009 Pallet Enterprise.

NWPCA claims that White and Company, along with PalletOne and Howe Wallace conspired together in beach of contracts and fiduciary duties to injure the NWPCA’s business by developing Best Load to compete against the Pallet Design System (PDS). The NWPCA’s latest lawsuit filed in Circuit Court for the City of Alexandria, Va. alleges that PalletOne violated its PDS lease. Additionally, the lawsuit contends that Howe Wallace while on the association’s board of directors breached his fiduciary duties to NWPCA by failing to disclose that PalletOne’s subsidiary White and Company was developing a product that competed with PDS.

The NWPCA filed a separate lawsuit against Mark White late last year in federal district court in Roanoke. That case alleged copyright infringement and misuse of trade secrets among other things. The NWPCA has indicated that it is dropping its copyright infringement claim to concentrate on violations of trade secrets, fiduciary duty and other claims.

Bruce Scholnick, President and CEO of the NWPCA, said, “Legal action was necessary to preserve the integrity of the Pallet Design System, but in going through this process we are learning that long-time, valued relationships were compromised by duplicitous actions and deceitfulness in the pursuit of commercial gain.”

Both White and Wallace counter that they have not violated any of NWPCA’s rights, and that Scholnick’s statement above is false and defamatory.But they also would like to find a win-win for everyone in this case. They deny developing Best Load to compete head-to-head with the NWPCA and believe that their actions have been misrepresented by the NWPCA’s recent member announcement.

In response, Mark White, Howe Wallace and PalletOne have filed counter suits in federal district court challenging NWPCA’s ownership claims of PDS and copyright filings. White has sought a declaratory judgment that NWPCA does not own the copyrights or trade secrets associated with PDS because Virginia Tech never properly assigned its rights to NWPCA. He also asserts that NWPCA’s copyrights in PDS are invalid for lack of ownership and the NWPCA’s copyrights in PDS are unenforceable due to copyright misuse. Finally, White has asked the federal court for the Western District of Virginia to rule that he has not infringed any valid or enforceable NWPCA copyright.

PalletOne, the largest pallet manufacturer in the country, has funded the development of Best Load through White and Company, a separate consulting company that is owned by PalletOne and Mark White. PalletOne and its CEO and president, Howe Wallace, have filed a separate counter lawsuit against the NWPCA claiming its use of a PDS license does not violate any NWPCA intellectual property in PDS (including any copyrights) or breach any valid agreement with PDS, and that PalletOne has the right to continue to use PDS. PalletOne has also sought declarations that NWPCA’s copyright registrations are invalid.

At the core of their argument, White and PalletOne claim that the 2001 agreement assigning PDS ownership to the NWPCA is void because Geza Ifju, the department head at that time, did not “have the authority to transfer Virginia Tech’s intellectual property.”

Also, White and PalletOne question the validity of NWPCA copyright filings because there was no formal agreement between the NWPCA and Virginia Tech before the 2001 agreement even though the association claimed ownership to the U.S. Copyright Office for each version of PDS developed since version 1.0 in 1984.

PalletOne, which had valid PDS licenses, allowed Mark White to use PDS as a tool for the White and Company consulting business as well as testing to compare outputs of PDS with those from Best Load. In its recent lawsuit against PalletOne filed in state court, the NWPCA alleged that PalletOne violated the PDS terms of use agreement and has required that PalletOne return all PDS software.

Howe Wallace said, “We viewed White and Company as just another PalletOne location. We decided to get an extra license for him and let him use it for the projects that he had because he needed to use PDS for some of the work he was doing on the consulting projects.”

Mark White denied using PDS as a basis to develop the Best Load program. White said, “I copied nothing from PDS and I have not stolen any trade secrets.”

By directly challenging the NWPCA’s ownership of PDS, White and PalletOne are going right at the heart of the association and the PDS program that has been a major revenue source for the association. Both White and PalletOne claim that they have filed these lawsuits only after being forced to do so after lawsuits were brought against them for launching the Best Load software. It appears that the recent counter lawsuits may push both parties to reach a settlement. Both sides have a lot riding on this case, but the recent counter lawsuits squarely put pressure on the NWPCA to settle.

There may be a potential for all sides to reach common ground. Lawyers representing both Mark White and the NWPCA will soon be meeting in the initial federal case filed last year to discuss the potential for mediating an agreement. This is a fairly standard part of many federal cases to see if all sides can reach common ground without having to go to trial.

Both sides seem to have asked for the moon in their lawsuits, which gives room for negotiation. It may be in both parties’ interest to settle before going to trial because both parties have a lot to lose depending on the outcome of a trial.

The Pallet Profile has had extensive coverage of this unfolding legal battle over the last month. If you want to know the real scoop on this and other news, you should be subscribing. Call Jeff McBee at 804-550-0323 to find out more. The Profile recently provided to subscribers an audio interview conducted with Mark White, Howe Wallace and their attorney.